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Over the Memorial Day weekend here in the U.S., I read over a book of some past distinction which I had long overlooked. It is Karl Polanyi’s The Great Transformation. Writing in the middle of World War II, Polanyi credits market capitalism with changing human civilization through economic growth but at a cost which he considered to be too high.

His thesis, not unlike that of modern business ethicists from Kantian, Christian and socialist standpoints, is that the new, transforming, capitalist economy was divorced from society and humane values. He wrote: “If industrialism is not to extinguish the race, it must be subordinated to the requirements of man’s nature. The true criticism of market society is not that it was based on economics – in a sense every and any society must be based on it – but that its economy was based on self-interest.”

Echoing Karl Marx, Polanyi reacted very negatively to the power of markets to subject work and labor to price, not dignity. With the rise of capitalism, he said, the market had replaced community with an atomistic and individualistic form of social organization.

The fault of capitalism, according to Polanyi, was to allow an economic sphere within society to become the source of moral law and political obligation.

I was struck by this insight as the premise of the Caux Round Table for Moral Capitalism is that morality – the ethics of good stewardship – can be the source of rational action in the economic sphere. That is why we call our understanding of markets “moral” capitalism.

I also learned from Polanyi, to my surprise, that the intellectual origin of the proposition that, by a law of nature – that of the animal kingdom, self-interest and survival of the strong were the necessary drivers of capitalist success was the thinking of one Joseph Townsend who in 1786 wrote a paper on poverty wherein he described the survival of the fittest between goats and dogs on the island of Fernandez in the Pacific ocean off the coast of Chile. The story was myth. Nevertheless, according to Polanyi, Townsend’s inference that animal social justice is also the driver of human economic behavior was later picked up by Malthus, Herbert Spencer and Charles Darwin to form the a-moral basis of an absolutist capitalism free from regulation and social control.

The important point to note is that to Townsend and Spencer, a law of nature peculiar to animals was assumed to apply as well to our species of mammals.

If, to the contrary, we humans have a moral sense, then there is no necessary prohibition of our applying that human standard of judgment to economics, permitting society and the state to engage with market forces and the self-regarding temptations they engender.

I was teaching in Bangkok recently and there was witness to gridlock in Thai politics where an election did not produce a majority political coalition. Then, I was in Australia just before the election which confirmed a very split electorate there as well. Now, we have election results in India which gave victory to the intensely Hindu communal vision of Narendra Modi.

Globally, we seem to have entered some new era of tension and standoff between very divergent political cultures. On one side is an internationalist mindset comfortable with globalization. On the other side is what has been framed as populist nationalism opposed to global institutions and arrangements.

Global internationalism seems the natural result of modernization – industrialization, the rise of middle classes, global supply chains, rational/legal bureaucracies and highly educated elites. Populist nationalism privileges national communities over internationalism and cosmopolitan tolerance of others.

Perhaps we should reconsider the once sacrosanct assumption that modernization will inevitably replace traditional cultures, values and behaviors?

We should then consider what role the Caux Round Table for Moral Capitalism’s principles for business, government, civil society and ownership of wealth might play in the interface between universalistic standards fit for globalism and the more parochial concerns of populist nationalism.

I thought of how the once very prominent thinking of Harvard sociologist Talcott Parsons, a student of Max Weber, might explain our dilemma of transition from modernity to some newer form of global community.

A review of Parson’s concept of “pattern variables” of social action is here for your consideration.

It was most reassuring to read recently Michael Tomasello’s book Becoming Human for its recitation of many observations and experiments on the moral development of young apes and young people. Tomasello makes a case for the unique humanness of our species arising from a moral sense which each of us learns as children.

Actually, that case was advanced by Mencius in China centuries ago.

If, as Herbert Spencer asserted in 1851, we humans have no moral sense, then any thought of running capitalism along ethical lines would be foolish. Since Tomasello now provides more research evidence that our moral sense is real, then the effort to shape norms and practices for moral capitalism is not a fool’s errand.

I include here a precis of Tomasello’s argument.

I hope you find it persuasive.

I wanted to share a short piece with you on moral capitalism in the workplace by our friend, Michael Hartoonian.

I would be most interested in your thoughts and feedback.

The other day, on a whim, I wondered what William Blackstone wrote about joint-stock companies. Blackstone wrote his thorough and erudite Commentaries on the laws of England between 1765 and 1769. His presentation of English common law as a coherent system of justice resting on natural law dynamics inherent in human nature solidified the intellectual framework for constitutional democracy under the rule of law ideal, a great boon to humankind as we have seen over the last 250 years.

Somewhat to my surprise, I did not find any reference to joint-stock companies in his index.

But I did find a reference to “partnerships.” Turning to page 437 in Volume 3 in my copy of his Commentaries, I made (to me at least) an exciting discovery overlooked all these years of legal study.

Blackstone commented on partnerships – a form of business enterprise with shared ownership and responsibilities – in his chapter on the courts of equity. In addition to partnerships, it turns out he put most activities in what we would consider business or capitalism under the jurisdiction of courts of equity and not courts of law.

Equity, he said, had jurisdiction of all matters where an accounting is required: partnerships, personal assets, debts, estate gifts and bequests, distribution of the residue of holdings, of deposits of goods for security, holders of goods on behalf of others, “factors” or wholesalers and agents.

Courts of Equity also had jurisdiction of cases of “security” where money was lent on the pledge of property as a security for re-payment, such as a mortgage. The pledge on oath created a moral obligation to perform. Thus, the basis for modern finance was put under the supervision of equity.

Any property put in trust for management by a trustee of some kind – a corporate director for example – was also under the jurisdiction of equity.

He wrote “It would be endless to point out all the several avenues in human affairs and in this commercial age, which lead to or end in accounts.”

Now, contracts, both express and implied, so necessary for finance and commerce were under the jurisdiction of courts of law unless some fraud or misrepresentation or other malfeasance was the cause of the dispute over performance by one party or the other to a contract. Then, the aggrieved party could move the litigation to a court of equity.

For centuries, the English lived under and argued their disputes with each other in two different systems of court procedure. One was law and the other equity. To oversimplify, law was based on rules allocating rights and powers, while equity was based on good morals to prevent abuse of powers given by the law. The combined system, we could say, attempted to integrate law with morals.

In the U.S. today, there is no longer such a distinction between two kinds of courts or two different procedures. In 1938, the federal courts combined law and equity in one system of procedure. Equitable doctrines can be applied by any court if relevant to the case before it. Thus, for decades, American law schools have not taught separate courses on equity and only a few have courses on English legal history.

But there is support for the Caux Round Table for Moral Capitalism’s mission of promoting moral capitalism in Blackstone’s discussion of equity.

Intuitive resistance to both the ideal and the practicality of moral capitalism arises from marginalization of the moral sense as a factor in human affairs. Giving up on the moral sense condemns capitalism to a brutish form of competition. With a conviction more in keeping with Herbert Spencer’s social darwinism and its modern progeny, the agency problem, many think of business as purely immediate selfish exploitation of opportunity without regard for good faith, proportionality, stakeholders or long-term consequences.

Law would be enough for such enterprise. There is no need for equity.

Moral capitalism, however, requires equity. Moral capitalism posits that “moral” factors not only should be applied in business but that doing so can predictably lead to better outcomes.

Blackstone’s commentary demonstrates that in his time, moral factors (equity) were required as a part of doing business in a “commercial” society. His presentation of the laws of England is proof that moral capitalism has a claim to legitimacy before the law.

I am often asked “What is the Caux Round Table for Moral Capitalism (CRT)?” I don’t really have a ready answer. Usually, to make it short, I say something like: “We advocate principled business leadership” or “We are a global network of individuals who seek to promote goodwill and develop good ideas for a better, more moral, capitalism.”

But calling the CRT an advocacy network doesn’t quite reveal how we go about our work or how we’ve evolved. We are not an academic body. We are not a foundation. We do not lobby, per se, in politics. We are in the public domain open to everyone. We trade in ideas. We bring people together for discussion, reflection and intellectual development. We do best when insights are put on the table.

Recently, on a whim, I picked up a book with the title The Republic of Letters. It was originally written in French by Marc Fumaroli and gives us a history of the evolution of an advocacy network which started the Renaissance and then provided momentum for the Enlightenment.

The so-called “Republic” defined itself by the practice of reading and discussing written texts. The Republic was anywhere such reading and discussion took place. It was a transnational cultural territory inhabited by vibrant minds engaging one another with ideas drawn from reading and circulated by spoken or written word.

It was self-consciously animated as being different from the “Republic of Christians” seeking to recover classic thought of Greece and Rome, especially the polymorphous discourse of rhetoric (Aristotle, Cicero, and Quintilian) as a basis for intellectual community and the pursuit of knowledge and truth.

Rhetoric is about persuasion, not compulsion, in thought and faith. It presumes the worth of the audience and seeks their understanding and assent. It is fundamentally pluralistic and democratic.

But in the wrong hands or stimulated by the wrong ideas, rhetoric can easily sink into sophistry and demagogy. Only the character of the speaker can forestall that degradation of discourse.

Rhetoric requires ethics to keep it away from the dark side of human desiring. Quintilian defined excellence in oratory as “A good man speaking well.” Such a persuader needed to be educated but first, had to be good. In that same way of leading others, the Republic of Letters was a psycho-social sphere promoting personal excellence.

Where the Republic of Christians was religious and circled around the exclusive truth of Christian scripture, the Republic of Letters was secular and saw itself freely open to principles of natural law.

The original Republic of Letters – Res Publica Litteraria – was stimulated by Petrarch (1304-1374) due to his “contagious passion for unearthing and reconstructing the scattered and buried treasures of the classical humanitas (the value and potency of being human) and its urbanitas (urbane sophistication).”

Later, Erasmus was its chair. One of his compatriots in the Republic called it “That ocean of antiquity which by natural law is common to all.”

Later, another member called it “This society of savants, fully occupied with cultivating, promoting and propagating the sciences and the arts, which is dispersed across all regions of this universe.”

The Republic had no law, no structure, no budget, no governance and no imposed authority. It saw itself as someplace outside the controversies between Roman Catholics and Protestants as to scripture, authority to speak for God and other asserted certainties.

It described itself as a society of minds with no citizenship subject to the strictures of any particular religion or state, a pedagogical and erudite province of culture – existing in books and in the minds of those who read them. Perhaps something like a chivalrous, semi monastic religious order of thinkers.

The Republic of Letters was a network of volunteers only. Its territory was the mind. Its governance was by letters and discussion groups. It had no power to coerce. It could only invite participation. Many names of such Republicans discussed in Fumaroli’s book were new to me and many were Italian, especially from Venice.

But such a Republic made our world better.

Could it be that the CRT is a nascent, new Republic of Letters?

A recent trip to Washington, D.C. got me thinking once again about moral capitalism and personal character.

I would be most interested in your thoughts and feedback.

In 1757, the American businessman Benjamin Franklin wrote a small pamphlet which he called The Way to Wealth. It was widely read and its maxims were assiduously followed.

Franklin thought of wealth as an asset, not as making a profit today but maybe tomorrow. Today, the Caux Round Table for Moral Capitalism seeks to draw attention to assets as the engines of market capitalism, including intangible assets such as personal character and social capital.

Wealth was capital for Franklin, that which made income possible. Thus, to enjoy lots of income in the future required first building up assets and sustaining their value. The most important assets for him were personal, readily at hand for every right-minded person.

His advice was:

1) Avoid bad habits: idleness; sloth; pride; folly; for God helps those who help themselves; want of care does us more damage than want of knowledge; a little neglect may breed great mischief

2) Be industrious day in and day out: many words won’t fill a bushel; do not squander time for that’s the stuff life is made of; the sleeping fox catches no poultry; there will be sleeping enough in the grave; lost time is never found again; one day is worth two tomorrows; early to bed and early to rise makes a man healthy, wealthy and wise; he that lives upon hope will die fasting; there are no gains without pains; diligence is the mother of good luck; little strokes fell great oaks; keep your nose to the grindstone

3) Our wealth is ourselves: trusting too much to others’ care is the ruin of many; he that by the plough would thrive, himself must either hold or drive; if you would have a faithful servant and one that you like, serve yourself

4) Keep what we have: get what you can and what you get, hold; be frugal; for age and want, save while you may for no morning sun lasts a whole day; a penny saved is a penny earned; think of saving as well as getting; a small leak will sink a great ship; fools make feasts, wise men eat them; silks and satins, scarlet and velvets, put out the kitchen fire; when the well’s dry, they know the worth of water; a ploughman on his legs is higher than a gentleman on his knees

For Franklin then, the way to wealth must run through character, an intangible capital of great value.